the evolution of financial intelligence · berman capital advisors llc 3475 lenox road, suite 970,...
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CuratorGifts for Every Personality: Original and Unusual Ideas for Giving This Holiday Season – and Beyond
t h e e v o l u t i o n o f f i n a n c i a l i n t e l l i g e n c e
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What are the advantages and disadvantages of setting up my own family foundation?
Berman Capital Advisors LLC Justin F. Berman, MBA, Founder and Principal
South Florida—Atlanta, GA Leading Wealth Advisor
A great privilege of significant wealth is the ability to help others. Many families are not satisfied sim-ply with responding to gift requests; they prefer to define philanthropic objectives and actively manage their philanthropic activities. Many decide to create a private family foundation, but, as with everything in life, this ap-proach has its pros and cons.
Starting a foundation is like start-ing any corporation, with the added burden of submitting IRS Form 1023 to apply for tax-exempt status. Unless a family member has expertise in this area, legal fees will result. The founda-tion also files Form 990-PF annually to report its activities and financial results to the IRS. This can be done internally or by a tax accountant.
Tax deductions in 2012 for a gift to a private foundation are limited to 30 percent of AGI for cash and 20 percent for appreciated stock, compared to 50 percent and 30 percent, respectively, in these categories for gifts directly to public charities. Carry-forwards of the excess are available for five years. Foundations must make annual grants of at least 5 percent of their asset base or pay an excise tax of 30 percent on the shortfall. Foundations pay a 2 percent
tax on investment income. This may be reduced to 1 percent if the foundation has made grants in excess of 5 percent for each of the past five years (or every year since formation if the foundation is less than five years old).
Activities not consistent with the charitable focus of the foundation are prohibited, including unrelated busi-ness income from investments. The IRS also scrutinizes transactions such as payroll to family members or bene-fits received from grantees, which may be viewed as prohibited self-dealing. Penalties range from the imposition of excise taxes to the loss of the foun-dation’s tax-exempt status.
Many families determine that all of this is a small price to pay for the long-term benefits of a private foundation. A private foundation allows a family to commit significant resources to charity now, add to it later and receive current-year tax deductions for each contribution, without having to “give it all away” immediately. The family can use the foundation to manage its chari-table giving for generations to come, making it a solid tool for passing down family values to future generations. Most foundations invest their assets in an attempt to cover the required
annual distributions, taxes and operat-ing expenses. As such, the foundation may also serve as a training ground to teach wealth management to younger family members. Finally, the family re-tains control of the foundation assets so they will always be used to further the family’s own philanthropic objectives.
By Justin F. Berman
BCA does not provide legal, tax or accounting advice. Donors are encouraged to consult their attorney or CPA regarding their individual situation. This article is based on information believed to be reliable as of October 1, 2012, but BCA makes no representation or warranty as to its completeness.
A N O T H E R O P T I O N : D O N O R A D V I S E D F U N D S
Families that do not wish to take on the burdens associated with a private foundation should consider a donor advised fund at their local community foundation or similar public charity. The initial—and subsequent—donations are deductible at public charity rates (currently 50 percent of AGI for cash, 30 percent for appreciated stock) and generally there are no minimum annual distributions. The money legally belongs to the charity once the donation has been made, and must be acknowledged as such in order for the contribution to be deductible, but the donors may direct gifts out of their fund. Before going this route, donors should be comfortable that the community foundation will support organizations that the donor ultimately wants to support.
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“[A family] foundation may serve as a training ground to teach wealth management to younger family members.” —Justin F. Berman
Assets Under Management$398 million (as of 10/1/2012)
Minimum Net Worth Requirement $10 million (for planning and invest-ment services)
Minimum Fee for Initial Meeting None required
Largest Client Net Worth Con� dential
Financial Services Experience 13 years
Compensation Method Asset-based and � xed fees
Professional Services Provided Planning, investment advisory, money management and family office services
Primary Custodian for Investor Assets Pershing, a BNY Mellon Company
Website www.bermancapitaladv.com
Email [email protected]
Berman Capital Advisors LLC 3475 Lenox Road, Suite 970, Atlanta, GA 30326 404.554.4999
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How to reach Justin F. Berman
To learn more about Berman Capital Advisors, please contact me at 404.554.4999.
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An athletic director at a major college
IF I WEREN’T A WEALTH ADVISOR, I ’D BE…
We particularly enjoy clients willing to be educated about the financial markets and investments, who are philanthropic and seek to leave a legacy for the community.
WHAT MAKES A GOOD CLIENT…
A good wealth advisor’s only agenda is to provide excellent
service to clients, with a top-notch team assembled
to anticipate and proactively tend to clients’ needs.
WHAT MAKES A GOOD WEALTH ADVISOR…
W O R T H . C O M D E C E M B E R - J A N U A R Y 2 0 1 3
Justin F. Berman founded Berman Capital Advisors in 2010 to provide objective wealth management and investment consulting services to high net worth clients. Previously he was a vice president in the Private Wealth Management Group of Goldman Sachs and was a member of the firm’s leadership council. He has also held positions within the Investment Advisory Group of MyCFO, Inc. and the Private Client Group at Arthur Andersen. Educated at Georgetown University, where he received his BSBA degree and graduated summa cum laude, he also holds an MBA degree from The Wharton School, at the University of Pennsylvania, where he was a Palmer Scholar. In his nonprofit activities, he is a trustee for Families First, Georgia’s leading foster care agency; a trustee of Georgetown University’s athletic department; a board member of the Assistance in Healthcare program for The Cancer Treatment Centers of America, Southeast Region; and a member of the American Jewish Committee.
About Justin F. Berman
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the evolution of financial intelligence
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Berman Capital Advisors LLC is featured in Worth® 2012 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of Sandow Media LLC. See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.
Justin F. Berman, MBA Founder and Principal
Berman Capital Advisors LLC3475 Lenox Road, Suite 970
Atlanta, GA 30326Tel. 404.554.4999